AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (11) TMI 1097
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.... journals as the assessee has not valued the stock of journal on the date of Balance Sheet." 3. "The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 7,56,935/- made by the AO on account of foreign travelling expenses as the assessee failed to submit proper explanation of frequent foreign travel." 4. "The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,17,20,448/- made by the AO on account of transfer pricing adjustment of export of services in violation of section 92C of the Act." 5. "The appellant craves to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 3. Briefly in the facts of the case the assessee had filed return of income of Rs. 4,25,97,873/-. The case of the assessee was taken up for scrutiny. The assessee was a group company of Sage Group where 76% equity of the assessee company was held by Sage Publication Ltd. UK and balance 24% was held by Sage Publications Inc., USA. The assessee was engaged in the publication of academic books and journals. The books and periodicals published in India were partly exported to the AEs a....
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.... the perusal of record, we find that the assessee had furnished the basic details of name of parties to whom the aforesaid payment was made. The Assessing Officer denied the claim of the assessee on the ground that the addresses of the parties to whom the aforesaid payment has been made, was not available. First of all, no such query was raised by the Assessing Officer during the assessment proceedings and hence non-compliance by the assessee. However, details were filed by the assessee before the CIT(A), who in turn forwarded the same to the Assessing Officer for Remand Report, which was never filed by the Assessing Officer. In such scenario, the CIT(A) verified the details filed by the assessee i.e. (i) Schedule of the royalty for books including the name of the author, title of the book, address of the author/royalty payee and amount of royalty payable as on March 31, 2009 and (ii) Schedule of the royalty payable for journals including the name of the journal, address of the royalty payees and amount of royalty payable as on March 31, 2009. The assessee also made detailed submissions with regard to the royalty payable at Rs. 85,34,634/- and the royalty expense claimed in the P&L....
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....gh several reminders were issued to the Assessing Officer but he failed to file the Remand Report. Even on merits, the issue has been considered elaborately by the CIT(A) as to the number of books dealt in and has noted that the average royalty expense per book title works out to Rs. 3,640/-. The average royalty expense per author works out to Rs. 6,240/-. The aforesaid payments were made by cheque and wherever applicable TDS was deducted and deposited. The said expenditure is thus allowed in the hands of assessee. In such circumstances, we find no merit in the Ground No.1 of appeal raised by the Revenue and the same is dismissed. 9. The issue raised in Ground No.2 is against the deletion of addition made of Rs. 17,82,362/-. 10. Briefly in the facts of the case relating to the issue, the assessee during the year had declared work in progress relating to journals amounting to Rs. 6,49,307/-. The assessee had not shown any stock of journal printed by it. In reply to the query raised by the Assessing Officer, the assessee explained that journals at hand, at the balance sheet date, were not valued. The Assessing Officer noted that the assessee was publishing volumes of journals a....
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....and journals published by its AEs. However, he was of the view that such huge expenses and frequent visits of foreign travel were not properly explained as what was the business purpose for which such visit was made. In the absence of the same, 25% of the total expenses were disallowed by the Assessing Officer at Rs. 7,56,935/-. 16. The CIT(A) noted the contention of the assessee that the business trips were made to group companies in order to attend global executive committee meets and to discuss critical business issues and the said travels were made by the Managing Director of the assessee company. Out of the total expenditure of Rs. 98,39,723/-, the expenditure on overseas travels was Rs. 30,27,734/-. The assessee explains that similar travel was being undertaken from year to year. The CIT(A) accepted the explanation of the assessee that where the assessee company was owned by non-resident companies incorporated in UK & USA and where all visits undertaken abroad were for business purposes, then no disallowance could be made out of foreign travelling expenses based on conjectures and surmises. 17. On perusal of record and after hearing both authorized representatives an....
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....m the AEs, the Assessing Officer had taken 100% profit on the additional cost of rendering the services and making an adjustment of Rs. 1.17 crores. The CIT(A) noted that the assessee had allocated 22% of the total rent as against 10% rent area taken by the Assessing Officer; as regards the administration of journal expenses, the allocation of cost was on the basis of turnover figures and selling and distribution cost did not relate to the services exported to AE and hence no cost to be allocated. The CIT(A) also took note of the contents of the affidavit filed by the assessee company that the observations of the Assessing Officer made in the assessment order as stated above para and his understanding of 100% margin over cost was not correct and was contrary to the submissions made by the assessee company and its authorized representatives during the course of assessment proceedings and the company denied from having made any such representation. The copy of the affidavit was forwarded to the AO who did not make any submission in response to the same. The CIT(A) deleted the addition observing as under:- 8.7. "I have carefully considered the submission of the appellant. ....
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....s to the AE was filed. Our attention was drawn to the said segmental details and it was pointed out that the margin of the transaction of provision of services "was at 47.11 %". He also drew our attention to allocation of cost which was majorly on actual basis and on some expenditure, turnover ratio was applied. The Ld.AR for the assessee stressed that allocation was partly accepted by the Assessing Officer and in the garb of cost plus method, the Assessing Officer re-allocated the cost on account of rented space area occupied, selling and distribution expenses and administration and journal expenses. The said allocation was made without any show cause notice to the assessee was also based on margins whereas the assessee had allocated this cost either on actual or on the basis of turnover. 23. We have heard the rival contentions and perused the record. The assessee had entered into multiple international transactions with its AEs and had benchmarked the arms length price of the said international transaction on aggregate basis. The assessee had applied Transactional Net Margin Method and compared its margins with the mean margins of the comparables selected by it. It may be poin....